Applicability of GST on Resale of Motor Vehicle

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This Article explains you what are the GST implications on resale of Motor Vehicle by a registered dealer who doesn’t deals in sale and purchase of Motor Vehicles. It means we will explain GST implications when a motor vehicle is sold or transferred by a business to another business or individual.

Here we need to keep note of Margin scheme for valuation of Capital Goods

The benefit of this scheme can be taken by a Registered dealer who is not

Fixed assets are the assets or things purchased for the purpose of long-term business use.

After this process, you will receive your Social Security Number within 2 to 3 weeks. The documents will be mailed to you at the provided mailing address. 

Meaning of Capital Goods– As per section 2(19) of CGST Act, Capital goods mean goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

The scheme was introduced on 25th January 2018 vide Notification No. 8/2018 – Central Tax ( Rate)

As per the Notification in case of resale of Motor Vehicles by a Registered Dealer who satisfies the above mentioned conditions GST @ 18% will be applicable on the Margin earned on the sale of Motor Vehicle

 

Margin = Sale Price of Motor Vehicle Less Written Down Value of the Motor Vehicle as per

Income Tax Act 1961

It is important to note that the Sale price of the Motor Vehicle should be justifiable in case the Department needs a clarification . We advise that before going ahead with this kind of transaction 3 sale price quotes should be taken for the specific Motor Vehicle from Car Resale dealers and then the Sale price should be freezed.

 

This scheme offers much relief to corporates who intend to reduce their assets base and increase liquidity by disposing off the motor vehicles which are no longer required to be used by the business.